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International convergence of accounting standards is not a new idea. The concept of convergence first arose in the late 1950s in response to post World War II economic integration and related increases in cross-border capital flows.
Initial efforts focused on harmonization—reducing differences among the accounting principles used in major capital markets around the world. By the 1990s, the notion of harmonization was replaced by the concept of convergence—the development of a unified set of high-quality, international accounting standards that would be used in at least all major capital markets.
The International Accounting Standards Committee, formed in 1973, was the first international standards-setting body. It was reorganized in 2001 and became an independent international standard setter, the International Accounting Standards Board (IASB). Since then, the use of international standards has progressed. As of 2013, the European Union and more than 100 other countries either require or permit the use of international financial reporting standards (IFRSs) issued by the IASB or a local variant of them.
The FASB and the IASB have been working together since 2002 to improve and converge U.S. generally accepted accounting principles (GAAP) and IFRS. As of 2013, Japan and China were also working to converge their standards with IFRSs. The Securities and Exchange Commission (SEC) consistently has supported convergence of global accounting standards. However, the Commission has not yet decided whether to incorporate International Financial Reporting Standards ( IFRS) into the U.S. financial reporting system. The Commission staff issued its final report on the issue in July 2012 without making a recommendation.
The following is a chronology of some of the key events in the evolution of the international convergence of accounting standards.
The 1960s—Calls for International Standards and Some Early Steps The 1970s and 1980s—An International Standard-Setting Body Takes Root The 1990s—The FASB Formalizes and Expands its International Activities The 2000s—The Pace of Convergence Accelerates: Use of International Standards Grows Rapidly, the FASB and IASB Formally Collaborate, and the U.S. Explores Adopting International Accounting Standards
The 1960s—Calls for International Standards and Some Early Steps
Interest in international accounting began to grow in the late 1950s and early 1960s due to post World War II economic integration and the related increase in cross-border capital flows. 1962—8th International Congress of Accountants Is Held—Many See a Need for International Accounting and Auditing Standards
The American Institute of Certified Public Accountants (AICPA) hosted the 8th International Congress of Accountants. The discussion focused on the world economy in relation to accounting. Many participants urged that steps be undertaken to foster development of auditing, accounting, and reporting standards on an international basis. 1962—The AIPCA Reactivates its Committee on International Relations
Likely in reaction to the 8th International Congress of Accountants, the AICPA reactivated its Committee on International Relations. The goal of that Committee was to establish programs to improve the international cooperation among accountants and the exchange of information and ideas, with the idea those efforts might perhaps lead to eventual agreement on common standards. In 1964, the Committee completed a review of accounting standards internationally, published as Professional Accounting in 25 Countries (AICPA). 1966—Accountants International Study Group Is Formed
The AICPA and its counterparts in the United Kingdom and Canada formed a group to study the differences among their standards. The group was active for about 10 years, producing studies of differences in 20 areas of accounting that also included conclusions on best practices. 1967—The First Textbook on International Accounting Is Published
International Accounting (New York: Macmillan, 1967) was the first textbook on international accounting. It was written by Professor Gerhard G. Mueller, who later became an FASB member (1996).